It's probably hard to find anyone in the U.S. who doesn't know when taxes are due—April 15. But few probably are aware of how long the Internal Revenue Service (IRS) can come after you for unpaid taxes. So let's briefly discuss the IRS' time limit for collection efforts and how this can impact you.     

Under the Internal Revenue Code, the statute of limitations for IRS collections actions is ten years. Importantly, the ten-year period doesn't begin when you file a return. Instead, it begins when the IRS sends you a bill for the outstanding taxes. (If you don't file a return at all, the time clock begins when the IRS creates a substitute return and sends you a bill based on their estimated version of what your return should have been.)

After the expiration of the ten years, the IRS cannot initiate or continue any collections efforts at that point. If you have any outstanding debt, the amount is written off, and you no longer have to pay it.

However, there are important exceptions to this rule.

First, you can agree to waive the ten-year time limit and give the IRS permission to continue collections after the expiration of the statute of limitations. You might wonder why anyone would willingly do this, but there is a fairly common reason to do it. The IRS may ask a taxpayer to agree to the extension as a condition for granting a payment plan, reduced tax bill, or other arrangement reached during a settlement negotiation.

The time limit also does not apply if the IRS is prevented from any collection activity, such as during the pendency of bankruptcy proceedings or the processing time for an installment payment plan. Other reasons for tolling the statute of limitations include having a military deferment, being out of the country for six months or more, or being involved in an IRS-related lawsuit.

If you have questions about your liability for unpaid taxes, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.